Why Invest In Southeast Asia

Why Invest In Cambodia

After emerging from its dark past, Cambodia has begun to solidify the remarkable progress it has achieved since adopting free-market economic policies in the 1990s. From 1998 to 2007, Cambodia’s 9.8% GDP growth ranked sixth in the world and fastest in the Far East after China. Cambodia’s continued upward trajectory is buttressed by durable fundamentals:

Political stability

Prime minister (under 60) has held power since 1985

Several key ministers are also long-serving and experienced

Ruling party’s mandate decisively renewed in 2008 election

Advantageous location

Sandwiched between two larger, more developed economies (Thailand and Vietnam) facilitating economic spillover

Midway between China and India – the most important growth areas of the 21st century

Along the Gulf of Thailand providing the country with ease-of-access to maritime trade

Workforce participation, household formation, and urbanization will all show robust growth over the next decade

Per capita GDP and purchasing power has more than doubled over the past decade and will continue to rise

Emerging import substitution opportunities in various industries

Unleveraged financial position

Relatively low levels of sovereign, corporate, and consumer debt

Well capitalized, conservative banking system

No tradition of government bailouts and subsidies (capitalism’s last bastion)

Future stock exchange

Cambodia Stock Exchange launched in 2011

Listing criteria are not onerous

The Role of Private Equity

Cambodia’s banks require debtors to pledge land titles as loan collateral and the bank typically lends 30-50% of the land’s assessed value. While this strict approach has helped keep the banking system solvent, it has excluded many businesses from securing project finance or working capital from banks. In the absence of equities or bond markets, or leasing or factoring companies, private equity stands out as one of the only viable and flexible financing solutions. Leopard Capital has gained prominence in Cambodia as the country’s first, largest, and most experienced private equity group. Thus, it is uniquely positioned to invest in many of Cambodia’s best businesses through transactions negotiated in a comparatively non-competitive environment.

Why Invest In Myanmar

Following recent democratization measures, including the release of hundreds of political prisoners, cease-fire agreements with ethnic rebels, and the incorporation of long-time human rights champion Aung San Suu Kyi into the political process, it is apparent that Myanmar is determined to become fully integrated into the international community. After being isolated for the better part of the last three decades, Myanmar is emerging as a potentially high growth target market for private equity investment due to its abundance of natural resources, including oil and gas, attractive tourist destinations, and young, well-educated labor force eager to work at regionally-competitive wages. These attributes, coupled with its strategic location bordering China, India, Thailand and Laos, give Myanmar the potential to emerge as one of the most dynamic economies of the twenty-first century.

Government Dedicated to Reforming the Economy

Central Bank has implemented a managed-float of the local currency (Kyat)

Process to register foreign companies and joint ventures has been reduced from one year to three weeks

President Thein Sein announced a “second wave” of economic reforms to reduce the state’s role in education, energy, forestry, healthcare, finance and telecommunications

Suspension of Economic Sanctions

High-profile visits from foreign ministers, including William Hague (UK) and Hillary Clinton (U.S.) are paving the path for improved relations

The US, EU, and a host of other nations have lifted and/or suspended all major economic sanctions against Myanmar as of May 2012

Increased International Support

World Bank/IMF agree to provide technical assistance on financial and economic issues after a 25 year hiatus

Railroad, roadway and oil pipeline from southern China (Kunming) to Rhakine State are under construction

Deep-sea ports at Dawei are being built in the south

Under-penetrated, Growing Domestic Consumer Market

Exceptionally youthful demographics ensures rising domestic demand (61% of the population is under 25 years old)

Workforce participation, household formation, and urbanization will all show robust growth over the next decade

Future Upgrade of Stock Exchange

Japan’s Daiwa Securities and the Tokyo Stock Exchange signed an MOU with the Central Bank of Myanmar (CBM) to modernize Myanmar’s securities market (May 2012)

The Role of Private Equity

In spite of economic reforms to decentralize the state’s role in the economy and restructure the financial system, the development of Myanmar’s private sector is inhibited by a lack of financing options and technical expertise. Myanmar’s banking sector suffers from stifling regulation. Laws stipulate that loan terms must not exceed one year and banks cannot lend without collateral of a greater value than the loan. These provisions ensure that obtaining a loan is near impossible for the majority of citizens. And while the country hosts Myanmar securities Exchange Centre, the bourse only lists two companies and is considered the smallest, if not the most primitive exchange in the world, rendering it practically obsolete. Furthermore, after years of government control of the economy and “crony-capitalism”, Myanmar’s business class lacks technical know-how. However, partnering with private equity firms can provide businesses with critical financing capital and technical expertise that will ultimately foster a strong and sustainable business community in Myanmar.

Why Invest In Laos

Laos’ economy has maintained consistently high GDP rates over the past two decades in large part due to strong growth among its main trading partners in the region, particularly China. The government’s initiatives to decentralize control of the economy and encourage private enterprise have also been a boon to economic development in recent years. Laos can expect to experience continued growth throughout the decade and beyond if it continues to capitalize on its strategic advantages.

Pro-business government

Enhancing overall business environment

Strengthening public finances

Improving foreign investment climate

Revitalizing the services sector

Prime Minister has taken a strong stance against corruption

Geography/Location

Sits at the crossroads of the Greater Mekong Sub-region (GMS), which has a population of over 300 million people

Neighbored by China, Vietnam and Thailand, three of the largest and fastest growing economies in the region

Home to world-renowned tourist destinations

Favorable Investment Climate

100% foreign ownership

Foreign land lease of up to 50 years

Attractive tax incentives for foreign companies

Open capital account; easy repatriation of profits

Low entry valuations

Increasing Trade Integration

Reduced quota restrictions and import tariffs

Lowering tariffs on a wide variety of products to below 5%

Signatory of a bilateral trade accord with the US

Joined membership to the WTO in 2013

ASEAN Free-Trade Area (Expected 2015)

Advantageous Labor Conditions

Among Asia’s lowest-cost workforce

Median age of 21 (lowest in the region), with 60% of the population of working age between 15-64

Workforce participation, household formation, and urbanization will all create robust growth over the next decade

Growing Securities Market

Lao Securities Exchange opened in 2010

Currently lists three companies, more expected IPOs in

2012-13

Listed companies are given tax incentives under new proposed tax legislation

The Role of Private Equity

Over the past decade, the Laotian government has made strides toward creating an investor friendly business environment. Unfortunately, many of the projects foreign firms have invested in have not benefited the people of Laos as many of the jobs were given to foreigners and goods exported. Private equity can address this. Through investments in SMEs and entrepreneurs in Laos, private equity can help ensure that foreign investment benefits Laotians by creating local jobs, providing technical know-how and stimulating the transfer of technology from abroad, all while institutionalizing to internationally recognized business practices. Through its investments, Leopard intends to help Laos cultivate its competitive advantages as it prepares to become fully integrated into the ASEAN Economic Community by 2015.